S&P Frets as Erdogan’s Son-in-Law Takes Economic Reins

Standard & Poor’s warned of the negative effects of increasingly centralized power in Turkey after President Recep Tayyip Erdogan appointed his son-in-law to head the treasury and finance ministry.

The ratings agency said it was too early to draw conclusions about the impact on Turkey’s credit rating of the hiring of Berat Albayrak, 40, who was also the country’s former energy minister, AhvalNews quoted Reuters as saying.

“When institutions are working in sovereigns, you have a strong civil service which can take decisions, technical decisions which often take place at a non-political level,” but that was no longer the case in Turkey, S&P’s senior sovereign analyst Frank Gill said.

S&P cut Turkey’s debt further into junk territory in early May, citing an overheating economy and Erdogan’s move to install himself in an enhanced role as president. Erdogan won re-election on June 24 and announced his new presidential cabinet on Monday. It included Mustafa Varank, a close adviser, as the country’s minister for industry and technology. The post of prime minister has been abolished.

S&P is due to decide on Turkey’s sovereign debt rating at a scheduled meeting in August. It currently rates Turkey at BB-, two steps below investment grade, lower than rivals Moody’s and Fitch.

“We are watching closely what the policy on the state of emergency will be, what the overall fiscal stance is going to be,” Gill said. “Will there be further extensions of the credit guarantee scheme? And where is the growth going to come from given that we feel the funding capacity of the banks is close to exhausted?”

From the moment he entered politics just three years ago, it was clear that Albayrak would not be constrained by the limits of his official energy brief.

Albayrak, the former business executive, soon found himself setting out the Turkish government’s position on military operations, joining high level overseas visits and accompanying his wife’s father on the campaign trail.

Few expected, however, that Erdogan would be bold enough to put his 40-year-old protege in sole charge of the economy at a time of mounting concerns about its health.

But foreign investors—who for years were soothed and reassured by slick former financiers appointed to senior government positions—remain nervous about how the economy will fare in the hands of a member of the Erdogan family who is a largely unknown entity.